April 26, 2011 / 8:17 PM / in 7 years

UPDATE 3-CN Rail ups forecast after strong Q1 profit

* Says expects diluted EPS of up to 15 pct in 2011

* Ups cashflow forecast by C$350 mln to C$1.2 bln

* Q1 adjusted EPS C$0.90, up 12.5 pct y/y

* Revenue rises 6 pct (Recasts with conference call)

VANCOUVER, April 26 (Reuters) - Canadian National Railway CNR.TO raised its earnings forecast for the year on Tuesday, after reporting a 31 percent rise in quarterly profit, as it overcame severe winter conditions that slammed its main rival.

Canada’s biggest railway said it now expects diluted earnings per share growth of up to 15 percent this year. The stronger outlook reflects the sharp increase in first-quarter profit and expectations that economic conditions in North America will keep strengthening.

In CN’s initial outlook in January it only said it was aiming for double-digit earnings growth in 2011.

The railroad, which has tracks across Canada and into the United States, also raised its cashflow forecast for the year to C$1.2 billion ($1.26 billion) from C$850 million before.

“I feel very good about this revised guidance and our ability to deliver on it,” Chief Executive Claude Mongeau said on a conference call with analysts and media.

“We have obviously had a challenging environment to deal with during the winter, but our level of preparation and our focus on execution really put us in good stead,” he said.

CN’s results come days after its smaller rival Canadian Pacific Railway CP.TO reported a surprisingly sharp 67 percent plunge in first-quarter profit as bitterly cold temperatures and avalanches halted some of its operations.

Heavy snowfall has now turned into spring flooding in the province of Manitoba and also around Chicago, causing some CN and CP rail lines to be shut down temporarily.

Flooding has had “no material impact” on CN so far, the railway’s chief operating officer, Keith Creel, said.

QUARTERLY EARNINGS BEAT EXPECTATIONS

Earlier Tuesday, CN reported its net income rose to C$668 million, or C$1.45 a share, in the three months to March 31.

Excluding an after-tax gain of C$254 million, or 55 Canadian cents a share, from a rail-line sale to a Toronto-area transit agency, CN reported adjusted diluted EPS of 90 Canadian cents, up 12.5 percent on a year ago.

That was slightly ahead of the 88 Canadian cents a share that analysts had expected on average, according to Thomson Reuters I/B/E/S.

CN’s revenue increased 6 percent to C$2.08 billion, virtually in line with analyst expectations of C$2.1 billion.

CN’s operating ratio, an important barometer measuring the railway’s operating efficiency, inched lower to 69 percent from 69.3 percent a year ago. The lower the ratio the more efficient the railway and CN has one of the lowest in North America.

CN shares ended 84 Canadian cents firmer at C$71 on the Toronto Stock Exchange before the results were released. The stock has gained some 6 percent so far this year.

$1=$0.95 Canadian Reporting by Nicole Mordant; editing by Rob Wilson

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